Corporate Governance Services
Antifraud Programs and Controls
A vital component of corporate governance
High-profile financial reporting scandals in recent years have brought renewed focus on the incidence and corporate-wide exposure to financial statement fraud. These developments have resulted in comprehensive legislation and Securities and Exchange Commission (SEC) rulemaking concerning corporate governance and internal controls. Among the regulations is the Sarbanes-Oxley Act of 2002 which mandates that company management must file an annual report of the adequacy of internal controls related to its financial reporting. Controls related to the prevention and detection of fraud are an integral part of a company’s system of
…show more content…
Two types of misstatements relevant to the auditor’s consideration of fraud include: misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets.” There are additional types of fraud that should also be considered when designing and implementing antifraud programs and controls. These include improper or unauthorized expenditures, such as bribery, self-dealing and other improper payment schemes. Examples of this are kickbacks and violations of laws and regulations, such as those that expose the company or its agents to regulatory or criminal actions, e.g., violations of the Foreign Corrupt Practices Act, the False Claims Act, and the anti-money laundering provisions of the Patriot Act. Although these types of fraud may not have a material impact on the company’s financial statements, they may result in loss of company assets, reputation risk and increased exposure to criminal and/or civil liability. Effective antifraud programs and controls encompass a wide range of activities and policies, including corporate governance, compliance with laws and regulations, internal controls and training and education. Although many companies possess some components of an effective antifraud program, they may lack completeness, a comprehensive framework for assessment and evaluation, and adequate documentation.